Question:
Discuss the central problems of an economy.
Answer:
The three central problems of an economy are:
- What to produce? [CBSE 2004C, 05, 06, 08, 08C, 09, 10; AI 2006, 10]
(a) What to produce refers to a problem in which decision regarding which goods and services should be produced is to be taken.
(b) Since its resources are limited, every economy has to decide what commodities are to be produced and in what quantities.
(c) The guiding principle for an economy here is to allocate resources in such a way that gives maximum aggregate utility to the society.
- How to produce?[CBSE 2014C, 2006, 08C, 10, AI 2001, 05, 08, 10, 11]
(a) How to produce refers to a problem in which decision regarding which technique of production should be used is made.
(b) Goods and services can be produced in two ways: by using labour intensive techniques, and by using capital-intensive techniques.
(c) The guiding principle for an economy in such a case has to decide about the techniques of production on the basis of cost of production. Those techniques of production should be used which lead to the least possible cost per unit of commodity or service.
- For whom to produce?[CBSE 2014, 2005C, AI 2013]
(a) For whom to produce refers to a problem in which decision regarding which category of people are going to consume a good, i.e., economically poor or rich.
(b) As we know, goods and services are produced for those who can purchase them or have the capacity to buy them.
(c) Capacity to buy depends upon how income is distributed among the factors of production. The higher the income, the higher will be the capacity to buy and vice versa. So, this is a problem of distribution.
(d) The guiding principle is that the economy must see here that important and urgent wants of its citizens are being satisfied for the maximum possible extent or not.
Introduction to Microeconomics
Q 1.
What is meant by economy?
Q 2.
Give two examples of growth of resources.
Q 3.
A country's resources are fully and p efficiently employed. The problem of scarcity exists. What advice would be given to raise the efficiency level of the human resource to fight scarcity?
Q 5.
Name any three variables of macroeconomics.
Q 6.
A doctor has a private clinic in New Delhi and his annual earnings are Rs 10 lakh. If he works in a government hospital in New Delhi, his annual earning will be Rs 8 lakh. What is the opportunity cost of having a clinic in New Delhi?
Q 7.
Explain the meaning of opportunity cost with the help of production possibility schedule.[CBSE, All India 2013]
Q 8.
Massive unemployment will shift PPC to the left. Defend or refute.
Q 9.
How does Maruti Udyog Ltd. fix the prices of its cars, is it studied in macroeconomics?
Q 10.
Which type of science is economics?
Q 11.
Give two examples of underutilisation of resources.
Q 12.
What is meant by economising of resources? [CBSE 2003]
Q 13.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 14.
"An economy always produces on but not inside PPC. Defend or refute.
Q 15.
State the central problems of an economy. [CBSE Sample Paper 2014]
Q 16.
Giving reason comment on the shape of Production Possibilities Curve based on the following schedule.
Q 17.
Economy always operates on PPC.
Q 18.
With the same amount of resources a farmer can feed the following combination of goats and horses:
Taking into consideration the options available with him, find out the opportunity cost of the farmer of feeding one horse.
Q 19.
Define Production Possibility Curve and state its properties.[CBSE, All India 2013 C]
Q 20.
India is a labour abundance and capital scarce economy. Which technique of production should be used to produce the commodity?
Q 21.
As water resources are limited in our country, how can we economise the water resources so that it could not cause a future problem for us? Give any two suggestions.
Q 22.
The government has started promoting foreign capital. What is its economic value in the context of Production Possibilities Frontier?
Q 23.
Production in an economy is below to its potentiality due to unemployment. Government starts employment generation schemes. Explain its effects by using production possibility curve.
Q 24.
Why PPC is concave to the point of origin? [CBSE 2011, AI 2007]
Q 25.
Give reasons for the following statements:
- Every economy has to make the decision relating to what to produce.
- Problem of choice arises because available resources have alternative uses.
Q 26.
PPC is concave shaped as production of one good can be increased only by reducing quantity of another good.
Q 27.
Large number of technical training institutions have been started by the government. State its economic value in the context of production possibility frontier.
Q 28.
Why is production possibility curve also called opportunity cost curve?
Q 29.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 30.
What does a rightward shift of production possibility curve indicate?[CBSE 2007]
Q 31.
State any three assumptions on which a production possibilities curve is based. [CBSE 2013 Q]
Q 32.
Because of destruction caused by war, a country's PPF will shift to the left.
Q 33.
A job guarantee scheme will lead to a rightward shift of PPF.
Q 34.
If a PPF shifts to the right, the new PPF will be parallel to the original.
Q 35.
If the economy operates inside PPC, it shows full utilisation of resources.
Q 36.
Scarcity of resources is a universal phenomenon and is not confined to poor and backward countries only. Comment.
Q 37.
What do you mean by the production possibilities of an economy?
Q 38.
Economic problem arises due to plenty of resources.
Q 39.
Economy can never operate outside PPC with the given resources and technology.
Q 40.
In an underdeveloped economy why there is the need of efficient utilization of resources?
Q 41.
Although water is useful, yet it is cheap. On the contrary, diamond is not much of use, still it is very expensive. Give an economic reason for this paradox.
Q 42.
Giving reason comment on the shape of Production Possibilities curve based on the following schedule.
Q 43.
Discuss the subject matter of economics.
Q 44.
Give one/two examples of microeconomics study.[CBSE 2004C, 09, 09C, 11C;AI 2004, 05, 07, 11]
Or
Name any three variables of micro-economics.
Q 45.
Only Scarce Goods' attract price."Comment.
Q 46.
A farmer is getting more profit by producing opium rather than that of wheat. In situation of famine which crop should be produced?
Q 47.
Name the economic value achievable when attempts are made to increase resources in the country.
Q 48.
What is the basic reason for economic problem in all economies?
Q 49.
Define Marginal Rate of Transformation (MRT). [CBSE 2012]
Q 50.
State any two central problems under ‘problem of allocation of resources’.[CBSE Sample Paper 2016]
